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Lou Dobbs Moneyline
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Aired January 02, 2002 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: This is LOU DOBBS MONEYLINE for Wednesday, January 2. Sitting in for Lou Dobbs, Jan Hopkins.
JAN HOPKINS, HOST, MONEYLINE: Good evening everyone. American military forces could be closing in on the Taliban's most notorious leader. Military officials say that special operation forces are moving northwest of Kandahar on a possible mission to find Mullah Mohammed Omar. Some reports say he could be hiding with Osama bin Laden. The Pentagon says there is no reliable evidence to support that.
Earlier today, a significant number of U.S. Marines returned to their base near Kandahar after searching a compound where Omar is believed to have hidden. Marine officials are calling it an intelligence gathering mission.
Signs of war and peace for India and Pakistan. Today, the foreign ministers of both countries shook hands at the beginning of an economic summit in Nepal. But so far, there are no plans for India's prime minister and Pakistan's president to meet there. Meanwhile, at least 19 people were injured in the Kashmiri capital of Srinagar. Police say that Muslim militants through grenades at a police convoy. And further south, there are reports of intense cross-border gunfire.
The Pentagon says that al Qaeda forces may have broken into smaller groups in Afghanistan, and those forces could be regrouping. Bob Franken is at the Pentagon tonight. Bob, what are the latest developments there?
BOB FRANKEN, CNN CORRESPONDENT: Well, first of all, as far as the U.S. Special Forces are concerned, they have been, the Pentagon says, have been, for the longest time, involved with opposition troops. What we now -- what we don't call opposition troops anymore, because they are now in control -- but the anti-Taliban troops. They have been involved continuously in searches for various al Qaeda leaders, Taliban leaders, most notable, Mohammed Omar, who is the supreme leader of the Taliban and still at large, and of course, Osama bin Laden.
As for Omar, the search for him is now -- there's a bit of a focus north and northwest of Kandahar. That is an area where there is a large gathering, over 1,000 Taliban forces. And there are sporadic negotiations, we are told, with the anti-Taliban leaders to try and come up with some sort of term of surrender.
The Pentagon is downplaying the possibility that Omar is one of those, but the Pentagon also makes it clear that there is to be no negotiation for Omar to go free. The United States wants him, wants to take him to captivity. That is one of the priorities of the U.S.
As for some of the al Qaeda forces who had been routed during various battles that led up to the collapse, the Taliban-al Qaeda alliance, there is a concern in the Pentagon that they are grouping.
(BEGIN VIDEO CLIP)
REAR ADM. JOHN STUFFLEBEEM: What we really do believe has occurred is that they have disbanded into smaller groups. It would be, I think, obvious that some have probably gone over the mountain into Pakistan. But we also believe that there are some of these small groups are still within Afghanistan, and may, in fact, be trying to get back together.
(END VIDEO CLIP)
FRANKEN: And all of this is complicated by the fact that the search along the Pakistan border has deteriorated some. Pentagon sources say several thousand of the Pakistani troops that had been conducting the search have been diverted, no longer on the Afghanistan border. They are now heading for the border with Kashmir, because of the facedown with India -- Jan.
HOPKINS: So, Bob, this regrouping that's possibly going on, can this be happening at the same time negotiations are happening? Does it allow them time to do their regrouping?
FRANKEN: Well, it's actually -- you're talking about al Qaeda forces, the ones who had been scattered after the fighting in Tora Bora, the ones who are the foreigners who were brought in for the most part. Many of them are still wandering around Afghanistan. Many were routed, but now they're trying to get together in small groups and trying to form some sort of cohesive unit again.
The Taliban operation is another thing altogether. That is a rather large group of Taliban soldiers. There is a negotiation going on for their surrender and perhaps their turning over their weapons. And that is the one where some people have said Omar might be there, although the Pentagon, as I said, is downplaying that.
HOPKINS: Thanks. Bob Franken, thanks for making that clear.
And Zacarias Moussaoui's trial will begin on October 14. A judge set that trial date today, while entering a plea of not guilty for the defendant. Moussaoui is the only person indicted in the September 11 attacks against America.
Deborah Feyerick has been following that case. What's the latest, Deborah?
DEBORAH FEYERICK, CNN CORRESPONDENT: Well, Jan, Zacarias Moussaoui walked into the federal courtroom and the words "prisoner" were on his green jumpsuit. Two very big federal marshals were at his side. And he really seemed eager to address the judge. Just seconds into the arraignment, he stood. He did not plead guilty or not guilty. Instead, he invoked his god saying: "In the name of Allah, I do not have anything to plea. I enter no plea." The judge said she interpreted that as a not guilty, and Moussaoui's lawyer said, yes.
Now, the 33-year-old French citizen of Moroccan descent is charged with being part of Osama bin Laden's terrorism conspiracy. Prosecutors say he was part of the plot, which on September 11 turned passenger planes into weapons of mass destruction. His mother, Aicha el-Wafi, was a no-show in court. She has been in the U.S. pleading her son's innocence. She refused to see him in jail after being told that an FBI agent would be present. She is now heading back to France. Before leaving, she spoke with reporters.
(BEGIN VIDEO CLIP)
AICHA EL-WAFI, MOTHER OF MOUSSAOUI (through translator): I came here to help my son to find justice, and so that he can have a fair trial. And because he told me he didn't do anything, because on September 11, he was in jail. So in my opinion, my son told me he didn't do anything, and on that basis, until I have proof to the contrary, my son has done nothing.
(END VIDEO CLIP)
FEYERICK: Prosecutors have linked Moussaoui to the suspected ringleader of the 9/11 attacks on the Pentagon and World Trade Center. One of those links: Well, Moussaoui was getting money in the U.S. from one of Mohamed Atta's Hamburg, Germany roommates. Also, prosecutors say, that Moussaoui was training at a flight school visited months earlier by Mohamed Atta.
Mohamed -- I'm sorry -- Moussaoui has also been linked to the same mosque attended by suspected shoe bomber, Richard Reid. Some officials believe Moussaoui is the missing hijacker, possibly even destined to be on the flight that crashed in Pennsylvania. That was the one plane that had four, not five, hijackers. Moussaoui was not on the plane, because he was in jail, taken into custody on immigration charges after flight instructors at the training school got suspicious, questioning his reasons for wanting to fly.
At today's arraignment, the judge set the trial date actually for October 15, and she did that after realizing that October 14 was Columbus Day, so she changed her mind on that. And the judge said she would provide any interpreters or additional lawyers the defense team might need to be ready by then. Defense (sic) lawyers do have until March 29 to decide whether they're going to seek the death penalty -- Jan.
HOPKINS: So it's the day after Columbus Day, right?
FEYERICK: Exactly.
HOPKINS: Thanks very much -- Deborah Feyerick.
U.N. military analyst, General Wesley Clark, joins us now with his perspective on the war in Afghanistan and the tensions between India and Pakistan -- welcome, General.
GEN. WESLEY CLARK (RET.), CNN MILITARY ANALYST: Thank you, Jan.
HOPKINS: We have been talking about this search for Mullah Omar. How important is this?
CLARK: I think it's very important, because we want to help the government of Afghanistan, consolidate its authority over the tribes who want to bring stability there, as the president said. And as long as Mullah Omar is out there and roaming unhindered, he's able to build coalitions and bring forces to bear that are going to be hostile to the government of Afghanistan.
HOPKINS: But we hear that there are negotiations going on, and during those negotiations, a lot of people could slip over borders, right?
CLARK: That's exactly right. And of course, there are negotiations going on. This is the way of war in Afghanistan. You know, after 20 years of conflict there, martyrdom is not very much appreciated. And the people who have looked at square in the face have decided they'd rather talk than fight, I think. And so, these negotiations are exactly what's to be expected, and we've got to come out on top of the negotiations by the presence of superior force, by our determination to bring Mullah Omar in, bring him to justice, get the information from him, and protect the stability of the government of Afghanistan. And so, there will be negotiations underlined (ph) by force -- our force.
HOPKINS: Do you think that Osama bin Laden may be with him?
CLARK: It's impossible for us to really know that. Yes, conceivably he could be, but if he has any inkling that forces are closing in on Mullah Omar, which he must, then he would certainly have attempted to go his own way.
HOPKINS: So the search is on for both obviously.
CLARK: Exactly. Osama bin Laden is still a threat as long as he is out there. It's not that he is the personal sole focus of the campaign. But he was the lynchpin that was holding al Qaeda together by all reports. And until he is brought to justice, one way or another, there is always the possibility that he will be able to re- establish the contracts, reform the network and pose a continuing threat to the United States and our allies.
HOPKINS: Let's talk a little bit about India and Pakistan. We had signs of both war and peace today. How important is what's going on there to what's going on in Afghanistan?
CLARK: Well, it's vitally important, as you suggest, because first, the confrontation that's mounted between these nuclear-armed rivals in South Asia has a potential of overshadowing all of the events in Afghanistan. If conflict were to break out, it would be -- it would be a possible escalation into nuclear exchange, and of course, this would be really a terrible, terrible thing in the world, and it would bring all of the efforts in Afghanistan to much lower priority.
Already it's had an impact on Afghanistan. We've heard that about half of the Pakistani troops that were securing the border into Afghanistan have been pulled off to face India. That's more or less to be expected, but it's regrettable, because it means that the strength of the forces along the border is much less. It gives us less chance to grab Osama bin Laden and the other elements we're expatriating (ph).
And of course, it also makes it -- the confrontation makes it much more difficult for us to deal with President Musharraf and have him put his priority on helping us in Afghanistan. He, after all, is going to be looking to his own country's security and concerned mostly about India.
HOPKINS: Well, and you also have a situation where the leaders are maybe inclined to talk. But then, you have extremist elements that want to fight.
CLARK: That's truly the case. However, what is important here is that the leaders do have control of their forces. And the danger in this case is the forces had been mobilized, and they're confronting each other along this long border. And so, it's a matter of intent, deception and relative advantage. Intent, because it's very important that each side -- each side's leaders understand the other side doesn't intend to go to war. And that's critical that the United States ensure that that intent is there, and try to help convey that to the respective parties.
And secondly, it's a matter of deception, because the forces are vulnerable when they're amassed like this. They don't want to be known. They don't want their positions pinpointed. They don't want to be vulnerable to a preemptive strike by the other side. And it's a matter of staying with this and slowly working to de-escalate the tension.
HOPKINS: Thanks very much -- General Wesley Clark.
CLARK: Thank you, Jan.
HOPKINS: And still to come tonight, we'll continue to update developments in the war against terrorism. (UNINTELLIGIBLE) and another snowstorm, this time not in Buffalo. We'll tell you how the south is coping with a big winter storm. AT&T and others are raising long distance phone prices. We'll tell you what's behind that rate hike. And we'll talk to the man who runs the company that makes many of this country's airport security systems -- L-3 Communications.
ANNOUNCER: Next: Jan speaks with Frank Lanza, chairman and CEO of L-3 Communications.
(COMMERCIAL BREAK) HOPKINS: Today, L-3 Communications bought the explosive detection business of PerkinElmer for $100 million. That unit makes the bomb scanning machines used for airline luggage. L-3 already makes airport security systems approved by the FAA and in use around the country and overseas.
The concern now is keeping up with demand. Frank Lanza joins us now. He is chairman and CEO of L-3 Communications.
FRANK LANZA, CHAIRMAN, L-3 COMMUNICATIONS: Hi, Jan.
HOPKINS: We have a lot of demand for new equipment to screen baggage.
LANZA: That's correct.
HOPKINS: And you're only in five airports at this point, is that right?
LANZA: That's about right at this point in time. We've only been in development over the last couple of years, and we just got certified about a year-and-a-half ago. And we just started pre- production about a year ago, so we're just starting to deploy our systems.
HOPKINS: And 500 airports you still have to go into?
LANZA: About 500 airports are predicted by the Department of Transportation that would need this kind of capability. There is another company that builds these machines. It has delivered about 150 total machines over the last maybe five years to the U.S. So this is a whole new world and a whole new response needed, Jan. It's going to be very difficult.
HOPKINS: So are you building more factories in order to keep up with demand?
LANZA: We don't really need more factories, Jan. We have a large production capability within L-3 in itself, and we outsource a lot of our commercial products. And being that we're in a major recession, a meltdown of telecom, all -- there's a lot of outsourcing factories that are available, and they're about 30 percent capacity. So it's not going to be a problem to build at reasonable rates that they want.
HOPKINS: Now, one of the problems, though, with the equipment is breakdowns.
LANZA: That's right.
HOPKINS: How do you -- how do you make them more reliable?
LANZA: Well, we have a bigger problem in the military. You know, we build everything from guidance systems for our military for 30 years. We know how to make things reliable. Unfortunately, we delivered our first system about a year ago to Dallas airport, which was the first one we ever built, and it had reliability problems, and it was Dallas/Fort Worth Airport. We improved that dramatically, and by the time we get into production this year, the reliability, we will be up at 800 to 1,000 hours of mean time to failures is what they call it. So that's not going to be a problem. We know how to do that.
HOPKINS: But it's going to take longer, isn't it, for people to check in if the baggage -- the checked in baggage has to be checked as well as going through security?
LANZA: Jan, that's one of the bigger problems that you hit upon, which is more a problem than it is delivering the equipment, which everybody is focused on. We're not, in this country, have integrated baggage systems like they do in Europe, where you check a bag, you put it onto a conveyer belt, and it's automatically distributed to the various airlines. These machines that have been deployed are in the lobbies of the airports. If you go to Baltimore Airport or San Francisco, you will see a 20 foot machine sitting right in the middle of the lobby.
Now, only about 2 or 3 percent of the people have been using that machine the last three or four years. Now, Congress says 100 percent bag inspection, right? So now, you've got a facilitation problem of how do you put these machines in an airport, how do you integrate them into the baggage systems without delaying people. And there's...
HOPKINS: Do you have to rebuild airports?
LANZA: We're not going to rebuild them, Jan. There are ways to do it. You can go and integrate a baggage system. For example, you can make a baggage depot, where you have machines in there for all airports, where you drop your baggage off, which may be an inconvenience, but it's not too bad.
So you're going to see that develop over the next couple of years. The important thing that Congress says is get started.
HOPKINS: Right.
LANZA: Get these machines in to the American public and feel safe.
HOPKINS: And who is going to pay the bill?
LANZA: We are, the taxpayers. And Congress has only appropriated about $150 million to date. The FAA, two weeks ago in front of Congress, said they need about $5 billion to facilitate the airports and buy the equipment. The equipment alone costs about $2 billion of the 5. So they have appropriated about $150 million to date, so Congress is going to have to have a supplemental in '02 (UNINTELLIGIBLE).
HOPKINS: I have another quick question.
LANZA: Sure.
HOPKINS: Does your equipment get the plastic explosives, like we saw in the shoes of the person coming from Paris?
LANZA: Every known explosive that we have, you can feel safe with.
HOPKINS: Thanks very much, Frank Lanza, the chairman and CEO of L-3 Communications.
LANZA: Thank you, Jan.
HOPKINS: Thank you.
You have probably heard about maglev trains. That's magnetic levitation. It's used to lift the train above the track and then propel it forward at high speed. Now, NASA is looking at the same technology to send a rocket into space. Fred Katayama has that story.
(BEGIN VIDEOTAPE)
FRED KATAYAMA, CNN CORRESPONDENT (voice-over): Spacecraft burns hundreds of thousands of gallons of fuel to reach orbit. Now, NASA researchers are looking into a much cleaner safer way of launching vehicles, electromagnetic power. That would make launches a lot cheaper. NASA aims to drive down the cost of launches from $10,000 a pound to $1,000.
DR. KENNETH HOUSE, NASA: Hopefully, we can reduce the weight of the fuel and oxidizer that's needed to be carried on board the vehicle, and that will decrease the size of the vehicle. So hopefully, we can get more payload into space with less of the fuel.
KAYAYAMA: Magnetic levitation, or maglev for short, works like this: It uses opposing magnetic polarities to lift the metal sled, carrying the plane off the tracks. For propulsion, the magnetic fields in the sled and in the rails repel each other, pushing the vehicle forward.
Last spring, NASA succeeded in magnetically launching this model plane, which accelerated to 60 miles an hour in less than half a second.
(on camera): NASA researchers have set lofty goals for this project, but they face a big bottleneck: money. All they have is $30,000 for the next phase of this project.
(voice-over): But NASA can't move onto the next stage immediately, but it welcomes competition.
JOHN COLE, NASA: This is research, so we're interested in anybody somewhere pursuing this.
KATAYAMA: The Navy is. It plans to make its fleet largely electric, catapulting fighters from its carriers with magnetic propulsion instead of steam. Northrop Grumman and General Atomics of San Diego are the development contractors competing on the project.
JOHN RAWLS, GENERAL ATOMICS: A very high power propulsion system is needed to give the energy to launch a large aircraft in the length of a football field. That will be demonstrated in about two years.
KATAYAMA: Rockets are a bigger challenge. NASA's next hurdle: launching a rocket a 150 miles an hour on a track that can carry up to two tons. One of its research partners, George Scelzo of Chicago- based PRT, is more bullish than some NASA scientists, who say maglev launches may be 20 years away.
GEORGE SCELZO, PRT ADV. MAGLEV SYSTEMS: Within five years, you'll see aircraft being launched magnetically. Most of the technical challenges have been overcome. We are now in the scaling areas to match the aerodynamics of the launch with the spacecraft and the launcher.
(END VIDEO CLIP)
KATAYAMA: But NASA and its partners will need to land millions more in money to propel their research on to the next stage -- Jan.
HOPKINS: But, Fred, is this something that since some of the research is already done that companies would come in to license the research or whatever?
KATAYAMA: You would think so. I asked Boeing, for example. Boeing says, yes, they are involved with that subcontractor, General Atomics. But basically, they're helping NASA. They're upgrading the test track that they're using in a military base. When I asked them, is it for commercial aviation application, they said no. They're not looking into it for now.
HOPKINS: We'll see what happens in the next few years though.
KATAYAMA: Yes.
HOPKINS: Fred Katayama.
Coming up next, U.S. Special Forces join the hunt for Osama bin Laden and Mullah Mohammed Omar. We'll have the latest. We'll also have the latest on the deep freeze in the deep south and all of the snow that's falling there and all of the problems it's causing. Then, new car deals created a used car glut. We'll tell you what that means for car buyers and sellers. And we'll have a report on rising phone bills and what's behind those long distance rate hikes.
(COMMERCIAL BREAK)
HOPKINS:
(LATEST DEVELOMENTS)
HOPKINS: While the euro became legal tender for 12 countries yesterday, it wasn't until today that that currency was truly tested, because this was the first real business day. Cash machines in some places collapsed because of euro overload.
CNN's Richard Quest spent the day speaking with consumers and shopkeepers. He joins us now from a beer hall in Frankfurt. Richard, it was that bad?
RICHARD QUEST, CNN CORRESPONDENT: No, Jan, it wasn't that bad. But it has been a very long day with people getting to grips with the new euro. (UNINTELLIGIBLE) day two has come to an end here in Germany, because we're coming up to half past midnight on the next day.
I want to show you, Jan, one big change that has taken place. This is what I had for dinner, not the blackboard. I actually had the little lamb cutlet (ph) with (UNINTELLIGIBLE) gratin, a posh way of saying lamb cutlets with potatoes and cheese. The interesting thing about this board is it's showing you just the euro price -- 11 euros 50. Put another way, that's roughly $10 -- ten and a half dollars. And what the board shows is that people here in Germany are getting to grips with the new euro very quickly indeed.
Yes, there have been a couple of minor problems. Cash machines did give out very large bills, a 100 euro, 200 euro notes. That's like giving out $100 bill, and try using that in a cab or a subway station.
Overall though, besides those small, little difficulties and working out what your dinner actually meant, the people in this bar have been telling me they welcome the euro, not only because it will make their foreign travel a lot easier, but also because it's a symbol of unity. It will bring the European Union closer together. Do they mourn the passing of their favorite German mark, which of course, made Germany a symbol of economic power across the European Union? Yes, they did.
But, Jan, if the euro manages to help bring Germany out of recession, then people here certainly, the younger people, the ones who are perhaps a little more familiar with dealing with different currencies, rates of exchange and new money, these people will think it's all been well worthwhile -- Jan.
HOPKINS: Thanks very much -- Richard Quest -- sounds like it was a good dinner.
Not even holiday sales and deep discounts could offset a dismal December for retailers in this country. Well, some say this was the worst holiday sales season in more than a decade. Lisa Leiter reports on why it might not have been as bad as was actually predicted.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: Yes, I got a good deal. I can't complain.
LISA LEITER, CNN CORRESPONDENT (voice-over): Bargain hunting was the big theme this Christmas.
UNIDENTIFIED MALE: What else would you like?
LEITER: Now that Santa Claus has come and gone, early figures show the holiday shopping season, while disappointing, could have been a lot worse. GEORGE STACHAN,GOLDMAN SACHS: Well, it was a pretty poor holiday season, unfortunately. In some respects, the last week or so had been better, but at the end of the day, it has been a pretty, pretty sluggish holiday selling season.
LEITER: An early reading from the National Retail Federation shows overall, holiday sales rose about 2.7 percent, the weakest in a decade. But the latest reports also show weekly chain-store sales did improve in the final week of December.
The biggest winners, the nation's top discounters. Wal-Mart expects monthly sales to rise as much as 6 percent, and Target sales topped forecasts last month as well.
LEE CRUM, STORE MANAGER, TARGET: The whole September 11 thing, I think, bred this kind of insecurity, you know, as far people out there, and as far as shopping (UNINTELLIGIBLE). But we saw, you know, huge benefits from that. So we're pretty excited about the Christmas season so far. Even after Christmas, selling has been extremely strong.
LEITER: The discount price wars could cause problems for some. Prudential Security downgraded Kmart stock and said it wouldn't rule out a Chapter 11 filing if sales continue to disappoint. As for online retailers, they racked up a respectable holiday season, but did not do as well as some initially expected.
LISA ALLEN, FORRESTER RESEARCH: Online retail will come in, I think, in the high single-digits increase over last year, which a lot of offline retailer would give their eye teeth for about now.
LEITER (on camera): Holiday discounts not only will cut into retailers' profits for the fourth quarter, but some say they may also prevent the rebound in sales retailers saw last January, a month when clearance sales traditionally get under way.
Lisa Leiter, CNN Financial News, Chicago.
(END VIDEOTAPE)
HOPKINS: For some insight into the economy, and what we can expect in 2002, the outgoing chief economist at Bear Stearns, Wayne Angel (ph). He officially retired from the firm late in December. Prior to that, he was on the Federal Reserve Board Governor -- Board of Governors from 1986 to 1994 -- thanks for joining us this evening.
WAYNE ANGEL (ph): It's nice to be with you, Jan.
HOPKINS: So is 2002 going to be a better year? Are we getting out of recession soon?
ANGELL: We're not going to get out in a very V-shaped way.
HOPKINS: It's not going to be strong.
ANGELL: Right. The recovery is going to be a jobless recovery. Labor productivity growth is very, very strong so we're actually going to see profit margins begin to widen prior to the time that the unemployment rate bottoms - I mean tops out. So unemployment rates are going to rise all year.
HOPKINS: So this sounds like stock market investors are going to like what's going on, but the consumer will still be concerned about losing jobs?
ANGELL: The consumer is going to be worried about losing jobs, as well as the hit to the pocketbooks in regard to equity values. But the real key question is going to be the capital goods industry, which went into recession way early and it still is not coming out, and in my view monetary policy is not erring on the size of accommodation at all. Monetary -
HOPKINS: Even though we're almost zero for interest rates?
ANGELL: Even though rates at 1 3/4, we still have many people who prefer to hold money at 1 3/4 percent in a six-month CD to investing in the stock market or buying bonds, or even buying real estate. So, the Feds job is to get the funds rate low enough so as to get people more motivated to take some risk.
So monetary policy works even in greater strides as we approach zero. So we don't need to worry about monetary policy not being powerful.
HOPKINS: So what you're saying is that the Federal Reserve still is going to lower rates more.
ANGELL: The Federal Reserve is still going to lower rates more, and the Federal Reserve will not be increasing rates in 2002. We'll have to wait and see when the unemployment rate begins falling in 2003, then the question about any rate increase might be on the boards.
HOPKINS: So let's go back to the stock market. The stock market is anticipating that the economy is going to turn. Are investors too optimistic about the strength of that return, or are they right because you're saying that profits are going to look good?
ANGELL: Investors are too optimistic about a V-shaped recovery, but they're not too optimistic in regard to the bright outlook for profits in the second half of 2002, and into 2003 and 2004. Labor productivity accompanied by declining wage rates is going to enable profits to recover first, but it's sure going to be pretty tough for the worker and the consumer.
HOPKINS: Thanks very much. Wayne Angell, outgoing Chief Executive at - or Chief Economist, not Chief Executive at Bear Stearns, thanks for joining us and good luck to you.
ANGELL: Thanks, Jan.
HOPKINS: The auto industry seemed to weather the recession pretty well, thanks to those zero percent financing deals. But while that may have been effective at warding off an industry depression late in the year, it may have come with some unintended costs. Tim O'Brien has that story from Washington.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT (voice over): New car dealers say the zero financing promotion has been a phenomenal success.
The fourth quarter is traditionally a slow time for the auto industry; 9/11 could have made it disastrous. Interest-free car loans have not only produced a rush of new car sales, they've also resulted in an unprecedented glut of used car trade-ins.
JONATHAN CHERNER, AUTOMOBILE DEALER: No question that about 50 percent of the people that we sell a new car to have a trade-in.
O'BRIEN: Ray Nichols, President of the National Auto Auction Association says the zero financing on new cars has indirectly contributed to record sales of used cars, to around 16 million in North America in 2001.
RAY NICHOLS, NATIONAL AUTO AUCTION ASSOCIATION: We're a tiny industry, selling an $80 billion amount of cars this year. In my lifetime, and I've been in this business since I was 19 years old, I don't think there's ever been a better time to buy a used car.
O'BRIEN: Spoken like a true car salesman.
NICHOLS: I believe it. No, I believe it.
O'BRIEN: Nichols says that's because prices on used cars have declined on average between 10 and 15 percent, and in some cases as much as 20 percent. The surplus of used cars with their lower prices could undermine the zero financing promotion on new cars, which some analysts believe could have been a costly overreaction.
JOHN CASESA, MERRILL LYNCH: It was so successful now that you can't have it both ways. You can't have better than expected sales in September, October, November, December and expect great sales in the months after that.
O'BRIEN: Casesa predicts a sharp decline in new car sales in the first quarter. Because the auto industry accounts for about five percent of the country's gross domestic product, that would not help the economic recovery.
(END VIDEOTAPE)
O'BRIEN (on camera): But it would help at least one person, the consumer in the market for a used car. There are lots of them. It's a buyer's market, Jan, likely to stay that way for some time.
HOPKINS: Sounds like lots of good deals out there.
O'BRIEN: Not on all cars. The low-end cars, the difference is negligible, and in the car of your dreams, which may be the car of everybody's dreams, the really popular models like SUVs, not quite so discounted.
HOPKINS: Thanks. Tim O'Brien in Washington. And coming up next, U.S. Special Forces step up the hunt for Osama bin Laden and Mullah Omar. We'll have the latest.
On Wall Street today, it was out with the old and in with the new, as stock prices ended higher. We'll have details. And we'll have a report on the latest investigation into Enron's collapse, all of that when MONEYLINE continues.
(COMMERCIAL BREAK)
HOPKINS: In the War against Terrorism, suspected terrorist, Zacarius Moussaoui entered no plea before a Federal judge in Virginia today. The judge said she presumed that meant not guilty, and Moussaoui's lawyer agreed. Moussaoui is the only person charged in connection with the September 11th attacks.
U.S. Special Operations troops are moving northwest of Kandahar on a mission which could include searching for Taliban leader Mullah Mohammed Omar, and Osama bin Laden. The Pentagon says it's seen no credible evidence the two men are hiding together.
Earlier today, about 200 U.S. Marines returned to a base near Kandahar. The Pentagon says they searched a walled compound that may have been abandoned by Omar.
A Muslim U.S. Secret Service Agent, removed from an American Airlines flight, has retained an attorney and is considering whether to sue the airline. The agent was trying to fly to Texas to join President Bush's security detail on Christmas Day. American Airlines says that the agent was removed because of inconsistencies in paperwork, required to carry a gun.
In this country, Tyson Foods gave its CEO a $2 million bonus for its most recent year. John Tyson, being rewarded despite the country's troubled acquisition of meatpacker IBP, and despite a Federal indictment for illegal alien smuggling. But that bonus flies in the face of a recent trend. With corporate profits down, bonuses are being cut or eliminated altogether.
As Susan Lisovicz reports, those cutbacks will have significant effects on an economy trying to dig out of recession.
(BEGIN VIDEOTAPE)
SUSAN LISOVICZ, CNN CORRESPONDENT (voice over): Employees at Delta Airlines, the Tribune Company, Sun Microsystems, and Bear Stearns were rewarded when times were good, and they are among those who now feel the flipside of performance-based compensation when the economy slides into recession.
Nearly 60 percent of companies surveyed in one recent study expect to reduce annual bonuses for executives; 54 percent plan to cut bonuses for middle managers, and nearly half will pay smaller bonuses to the rank and file. Wall Street is one of the most generous industries when it comes to bonus time and consequently one of the hardest hit. By one estimate, 2001 bonuses will total $10 billion, down more than 40 percent from a year earlier. And overall corporate cutbacks are expected to have a profound effect on consumer spending.
Goldman Sachs estimates $40 billion lost over the next few months from slashed cash and stock bonuses.
JAN MATZIUS, GOLDMAN SACHS: If you prevented companies from cutting year-end bonuses, presumably they'll cut employment even more.
LISOVICZ: Experts say companies are trying to manage their financial and human resources.
RICH BEAL, WATSON WYATT WORLDWIDE: Organizations began cutting back their workforces 12 months ago, first by attrition, then by real cutbacks. And at this point, quite a few organizations that are at least in moderately good shape, are quite hesitant to cut back further, even if the economy remains weak.
LISOVICZ: Analysts say corporation American has probably never slashed bonuses so severely, in large part because this type of compensation has become much more popular over the last decade, when employees enjoyed the benefits of a boom economy.
(END VIDEOTAPE)
LISOVICZ (on camera): Bonuses have become an important part of employee retention, and even in these difficult times, many companies are conscious of the need to keep their best people.
One recent study found nearly 30 percent of respondents had new programs in the works, including non-cash incentives, such as additional vacation time, to reward key employees. Got to be creative.
HOPKINS: Right. There are other ways to do it. Thanks, Susan.
A late day rally for the markets, the Dow gaining 52 points, the Nasdaq up 29, the S&P adding 6. For complete coverage of today's trading, let's turn to Christine Romans at the New York Exchange, and Greg Clarkin at the Nasdaq Market Site. Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Jan, you know that rally came late, but it was a rally nonetheless. The Dow about 10,000 and traders on the floor said it was good volume on the buy side late in the day. They say that's what they like to see if they're going to turn this thing into a Bull market for 2002.
Let's take a look at some of the top movers here at the Big Board. K-Mart on this list, down about 13 percent, hitting a 20-year low after Prudential put a sell rating on it. A bankruptcy is not imminent, Prudential said, but it could happen if the first half of 2002 is tough. K-Mart says it has sufficient funds to carry out its strategy. Meanwhile, Micron Technology up $2.24, about seven percent, the chips rallying overall, Micron leading them here. AT&T up about 56 cents, Merrill Lynch upgrading it to a buy from a neutral. They like that Comcast purchase of AT&T's cable business.
And this one, BJ's Wholesale Club, is a retailer down about $1.28. We were going to talk about BJ Services, BJS down $2.30. That is an oil services stock. The whole oil services sector getting hurt here today, as did the retailers. Two groups on the downside.
And finally I want to talk about Tyco quickly, TYC is its ticker symbol, this one down about 2.8 percent. This had been down worse than that, stabilized a bit here. There is a research firm called SEC Insight, that in a newsletter today, urged investors to be cautious on Tyco.
Tyco came out and said they have no reason to believe there is no SEC, new SEC investigation into that company, and when Tyco released that statement, then the stock did a little bit better, but it still ended lower on the day. Jan.
HOPKINS: Thanks, Christine Romans at the New York Stock Exchange. The Nasdaq adds one and a half percent, as investors pick up chip stocks and some others. For details, let's go to Greg Clarkin at the Nasdaq Market Site. Greg.
GREG CLARKIN, CNN CORRESPONDENT: And Jan, you know the bulk of the buying did come in the last hour of trading or so, but really the roots of the rally can go back to a piece of news that came out before the market opened, and this concerns the semi-conductor company Hinics (ph). They're out of South Korea.
The company saying that they've been able to raise prices or will raise prices by about 30 percent or so. Now they supply memory chips to everybody from Dell to IBM. Investors took that as a sign that pricing power is returning to the chip companies, maybe the pickup and demand as well, and that really lit a fire under the chips.
The chips were strong all day, and accelerated those gains in the last hour. You can see how Intel fared on the day. PMC-Sierra, the big communications chip company did nice business. Also, the hardware stocks and the networks also posted big gains. Apple Computer up about six percent. Sun Microsystems also posting a gain.
Here are some of the networking stocks: Cisco, Redback, Foundry and Juniper all with sizable gains on the day, so all three of those groups hardware chips, networkers really posted nice gains throughout the day and again saw those gains accelerate in the last hour of trading or so.
As for what lies ahead, a lot of investors say at this point, traders as well saying at this point what they're looking for is possible profit warnings, and in the next couple weeks, they'll start to see some fourth quarter earnings reports. But the Nasdaq, Jan, finishing right at the session high, 28 point gain, 1,979. Back to you. HOPKINS: Still below 2,000, thanks Greg.
CLARKINS: It is.
HOPKINS: But a good beginning for the new year. Greg Clarkin at the Nasdaq. The new year brings only more pressure for Enron. Today, two senators announced separate inquiries into the company's collapse. New questions emerged over how much top executives knew about Enron's controversial partnerships. That's a key factor in the company's fall. Allan Chernoff has the story.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF (voice over): Senator Lieberman is questioning whether the SEC and other regulators failed investors, and Senator Levin intends to subpoena documents from top Enron officials next week, to determine what they knew and when they knew it.
SENATOR CARL LEVIN (D) MICHIGAN: Something is rotten in the world of Enron and we're going to get to the bottom of it, and we're going to do it in a thorough way, in an objective way.
CHERNOFF: Enron Chairman, Kenneth Lay and former CEO and President Jeffrey Skilling knew plenty, according to a Wall Street Journal report, citing internal Enron documents, indicating they viewed the so-called LJM partnerships as critical to the company's growth.
Enron this afternoon said the report was nothing new. "We have always stated that Enron senior management and board, in conjunction with outside auditors and legal counsel establish procedures and review processes to ensure that the LJM transactions were in the best interest of Enron and its shareholders and appropriately disclosed."
What wasn't disclosed is that the off-balance sheet partnerships helped Enron hide billions of dollars in debt. Skilling abruptly resigned in August, citing personal reasons. Last February, when Enron stock traded at 82, he told MONEYLINE Wall Street was undervaluing the company.
JEFFREY SKILLING, ENRON FORMER PRESIDENT AND CEO: Our retail business which is brand new and it's growing 100 percent a year, we think that should be valued higher and then broadband business has got enormous potential for the future.
CHERNOFF: At the time though, Skilling was selling Enron stock, more than $15.5 million of it during the first half of last year.
Chairman Ken Lay was left to confess last October 16th that the partnerships would knock $1.2 billion off shareholder equity. He maintained the company had no accounting issues.
KEN LAY, CHAIRMAN, ENRON: So it would be one more year of about 20 percent growth in earnings per share, and we've been doing that for the last three or four years.
(END VIDEOTAPE)
CHERNOFF (on camera): Enron's auditor, Anderson, this afternoon announced it had received a thumbs-up in a peer review from fellow auditing firm, Deloitte and Touche. Deloitte saying Anderson complies with professional standards, although it said the firm does need to improve its documentation of certain auditing procedures. Jan.
HOPKINS: Lots of questions about Enron.
CHERNOFF: Oh, yes.
HOPKINS: Coming up on MONEYLINE, it looks like the telephone price wars are over. We'll tell you what's behind the hike in long distance rates, when MONEYLINE continues.
(COMMERCIAL BREAK)
HOPKINS: Many companies these days are slashing prices to lure business, but that is not the case in the telecommunications industry. AT&T and other big carriers are actually boosting prices in an attempt to lose some of their least lucrative customers. Steve Young has the story.
(BEGIN VIDEOTAPE)
STEVE YOUNG, CNN CORRESPONDENT (voice over): Forget telephone price wars of the last decade. With the consumer long distance business on the ropes, the big three, AT&T, MCI and Sprint are all raising prices to get the biggest bang from each customer they keep, and shed customers who spend the least.
SAMUEL SIMON, TELECOM RESEARCH AND ACTION CENTER: They need to get $5 to $10 a month for every customer they have, and they're doing it by rate increases, universal service charge, hidden fees and the like to get that minimum monthly amount.
YOUNG: Much of the price creep is hidden in confusing surcharges, including that government mandated universal service charge. It's supposed to insure residents of rural America have adequate phone service at a non-exorbitant rate.
Regulators set a 6.8 percent universal service fee, but AT&T has just raised what it charges customers to 11.5 percent, up from 9.9, saying it's entitled to the difference for a variety of reasons. MCI is still at 9.9, so is Sprint.
SCOTT CLELAND, CEO, THE PRECURSOR GROUP: What I would take away from AT&T doing this, is it tells you that the long distance industry is under a lot of distress, because the shenanigans of increasing the universal service fee tells you that they're not as concerned about upsetting the regulators, that they're more concerned about collecting the revenue.
YOUNG: Customers who haven't chosen a price plan, but are using a so-called basic long distance rate, will be hardest hit. AT&T and MCI are hiking their basic rates about 17 percent. Sprint is doubling its Saturday rates to 20 cents a minute for some customers.
(END VIDEOTAPE)
YOUNG (on camera): Because of history, analysts say the phone companies don't expect a major consumer revolt, after all half the nation's long distance customers haven't bothered to switch companies in 20 years. Jan.
HOPKINS: That's amazing, with all those phone calls. Thanks, Steve. Coming up next, a look at your e-mail and some news that might move the markets tomorrow.
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ANNOUNCER: Tomorrow on Lou Dobbs MONEYLINE, as automakers unveil the hottest new designs at the LA Auto Show, we take a look at the auto industry. With zero percent financing, cares are racing out of showrooms, but are profits stuck in reverse? Tomorrow on Lou Dobbs MONEYLINE.
(COMMERCIAL BREAK)
HOPKINS: Tomorrow, reports on the economy include weekly jobless claims, construction spending, and auto sales U.S. Senators depart for Afghanistan, marking the first time senators have visited the scene of U.S. military attacks. Also tomorrow, carmakers will showcase their latest vehicles at the LA Auto Show.
And now, it's time for a look at your thoughts. Doug Dorrer had a question regarding the new Euro currency:
"I have several thousand German Marks at home here in the U.S. How long do I have to convert them to the Euro or Dollar? Would the exchange rate be devalued now that the Euro is the main currency?"
Well, first of all the conversion between the Mark and the Euro has been fixed for the past three years, so you don't have to worry about the exchange rate changing.
As for deadlines, each country has a different timetable for exchanging currencies. In Germany, the Central Bank will convert Marks to Euros indefinitely. But in the United States, most banks will only convert so-called legacy currencies for a month or so. After that time, it will be very difficult to find a bank willing to make the trade.
One viewer commented on President Bush's end of the year radio address. Tom Austin from Cleveland, Ohio said:
"The President blamed the Senate for the recent failure to enact an economic stimulus package" but Austin believes it was the House Congressional leaders that caused the problems.
"The House leadership hijacked worker unemployment benefits and ransomed those benefits, in exchange for new corporate entitlements and irresponsible tax cuts for the richly employed." Austin continues: "Most caring Americans understand that those most likely to stimulate the economy are the unemployed who need money to pay their rent or mortgage, or health insurance and other basic human necessities."
Send us your comments. We'd love to hear from you. E-mail us at moneyline@cnn.com and please include your name and address.
That's MONEYLINE for this Wednesday evening. Thanks for joining us. I'm Jan Hopkins in for Lou Dobbs. Good night from New York. "WOLF BLITZER REPORTS" begins right now.
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